It is commonly assumed that the medical liability system works as advertised: injured patients sue negligent doctors for compensation for their injuries. This assumption is the basis for arguments defending the current system. However, medical liability in practice differs greatly from theory because the system is ineffective at deterring negligent injuries and fails to justly compensate those truly harmed by negligent injuries, thereby providing compelling grounds for serious medical liability reform.

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    A recent medical malpractice report is incomplete and lends itself to misinterpretation, according to a new Joint Economic Committee analysis released today by Vice Chairman Jim Saxton. The report, issued in August by the U.S. General Accounting Office (GAO), has been cited in numerous press accounts as evidence that there is no medical malpractice crisis. The new Joint Economic Committee policy brief, entitled Medical Malpractice Reform: Perspectives on Recent Findings by the GAO, shows that much of this coverage has ignored important elements of the GAO report, as well as flaws in certain aspects of the report itself.

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    The auto insurance system in the U.S. suffers from several major failings, including excessive cost, uneven compensation for injuries, extensive fraud and abuse, perverse incentives generated by pain-and-suffering damage awards, and the negative impact on the poor and welfare recipients.

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The shortcomings of the medical liability system have driven up health insurance premiums and reduced access to medical care, according to a new Joint Economic Committee (JEC) study released today by Vice Chairman Jim Saxton. The new study, Liability for Medical Malpractice: Issues and Evidence, examines the current status of the malpractice system, documents the numerous flaws in the system, and discusses the need for and benefits of reform.

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    This study examines the cost of auto injuries and related legal expenses to employers, as well as the potential relief that the Auto Choice reform could provide.

• Businesses spent close to $21 billion on liability insurance for auto accidents in 1994, averaging more than $64,000 per on-the-job injury. Employers spent an additional $18 billion on fringe benefits for auto injuries.
• The tort system's perverse incentives increase the cost of doing business by diverting resources from worker payroll and capital investments, as well as increasing the costs of shipping goods to market.
• Lawsuits related to auto accidents are the most common type of tort litigation brought against businesses. Excessive liability insurance costs can easily bankrupt small businesses, most of whom have gross annual receipts under $25,000.
• Auto Choice would reduce the cost of commercial auto insurance by 27 percent on average, totaling up to $8.1 billion in the first year and $41 billion over five years.
  
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    The current system of paying for auto injuries suffers from two fundamental problems: premiums are too high and victims with serious injuries rarely receive full compensation. Of particular concern is how the shortcomings of the present tort liability system adversely impact low-income and urban households. This paper reviews the causes and consequences of a costly and inefficient auto insurance system, and discusses the benefits and savings that the Auto Choice reform would produce.

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    Americans pay exorbitant amounts for auto insurance thanks to excessive litigation and escalating fraud and abuse. One reform that would help address these problems is Auto-Choice. With Auto-Choice, drivers could choose to opt out of recovery for "pain and suffering" damages in return for significant premium savings and quicker compensation for economic losses. Drivers who prefer to remain with their state's existing insurance system would be substantively unaffected.

    This study estimates that Auto-Choice would reduce auto insurance premiums 32 percent nationwide, or $45 billion in 1997. Over five years, Auto-Choice would make available a total of $246 billion in savings. On the individual level, Auto-Choice would save the average policy $243. Low-income drivers would realize substantially greater savings -- 48 percent on average.

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    This JEC Study documents the substantial benefits that would result from three different proposals to reform the tort system. In particular, the report details the $40 billion in savings that would be made available by the "auto-choice" reform.

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